In this week’s posting I would like to explore in more detail the concepts of degrees of freedom and optimisation and the impact these two variables can have on the development and outcomes of a trading system. Degrees of freedom in a trading system relates to the number of criteria that are used to filter…
Having worked through the processes to either develop and test your own trading system or perform detailed due diligence on a commercially available trading system using the steps discussed over the past weeks, this week we will look at what constitutes a winning trading system. A winning trading system will give you a profitable ‘edge’…
Having researched and designed your trading system by working through the steps we have discussed so far it is now time to back-test your ideas to see if the system ‘works. Research is conducted via back-testing concepts against available historical data. This is where your programming skills are required, unless you wish to conduct your…
Having determined the objectives for your trading system and with a thorough understanding of what it is you want to achieve with your ‘edge’ it is now time to look at the entry and exit signals you will use. Specifying exit signals is a must! Too many discretionary traders and those lacking a disciplined approach…
Having set out on the path of constructing your own trading system, it is now time to consider the aims and objectives of your system. In other words, what you are really doing, and why you are doing it. If you don’t specify what you want your edge to deliver, how will you know when…
In last week’s blog we looked at the mindset required to begin designing and building your own trading system. This week we take a look at the tools and resources required to undertake the journey. To design your own system with an ‘edge’ over the market certain basic resources will be required. These resources include…
Over the next few weeks I would like to focus on the steps and processes involved in designing a trading system. Whilst by no means an exhaustive list, it will provide an insight into the process for those interested in designing their own trading system and for those who are weighing up whether to develop…
We firstly need to understand what knowledge actually is. Many spruikers spruik that all you need is knowledge and they have the knowledge that you need to get ahead. Well I have some bad news for you, knowledge alone will not do the trick for you. There are thousands of well educated derelict people around…
Maybe you can now understand that there is more to investing than just making money. It is an ongoing journey and transition process of acquiring new skills and improving them. Sure, you could say that the same applies to golf, gardening or stamp collection but few other environments provide the magnified pressure cauldron such as…
